Deducting Real Estate Commissions in Canada

Selling a Revenue Property in Vancouver BC: Capital Gains Tax and Deducting Real Estate Commissions in Canada

So, you’ve decided to sell an investment condo or another revenue property in Vancouver. The first thing you need to do is talk with your mortgage lender to check how much your mortgage penalties are going to be.

Once you have clarity on the costs to end the mortgage, it’s time to consider The Taxman, aka Canada Revenue Agency (CRA). Here are some common questions regarding the expenses that a seller faces.

Are the Sale Proceeds of an Investment Property in Canada Taxable?

When selling a revenue property, capital gains (i.e., an increase in the value of the property) are absolutely taxable. But how much? “It depends on a couple of factors,” says Sean Akeroyd. “Your income tax bracket and how much income from other sources you have. Generally, 50% of the sale of an investment property will be included in your income.”

So, for example, if you buy a property for $1 and sell it for $2, 50¢ of that capital gain will appear on your tax return as taxable income.

Timing is Everything When Selling a Revenue Property!

The timing of the sale of a revenue property can significantly affect how much tax you pay. If you know you’re going to have a year where your income might be a bit lower—perhaps due to retirement or taking a long vacation—you might want to consider holding off on selling your revenue property until then.

As Sean points out, even with the additional capital gains from the sale of your revenue property, you’ll still be exposed to a lower marginal tax bracket.

More is Less? – Selling an Investment Property Owned with a Partner or Spouse Can Have Benefits

Another interesting tax scenario when selling investment properties in Canada is when the property is owned by equal partners, such as a spouse or business associate.

Let’s say one partner makes $1 a year, and the other partner $2 a year. It’s possible to spread the capital gains between the partners disproportionately to minimize the overall tax exposure for both. This strategy is common among husbands and wives.

Are Real Estate Commissions on the Sale of a Revenue Property Tax Deductible in Canada?

Lastly, are real estate commissions incurred when selling a revenue property in Vancouver tax deductible? Yes, they are. Commissions on the sale of a revenue property in Canada are tax deductible as they are viewed as a selling expense by CRA and can be deducted to lower the total taxable capital gains.

Of course, before you decide to sell any revenue property, I encourage you to consult with an accountant who can look into your specific tax situation.

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